NHK SPRING CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, the Company recorded higher revenue and profit. In particular, growth in Ordinary Income and Net Income significantly exceeded growth in Operating Income, driven by an increase in non-operating income. Revenue was ¥2,161.6B (¥1,999.5B in the same period of the previous year, YoY +8.1%), Operating Income was ¥143.6B (¥110.5B, YoY +30.0%), Ordinary Income was ¥206.4B (¥120.2B, YoY +71.7%), and Net Income attributable to owners of the parent was ¥157.3B (¥89.8B, YoY +75.2%). The primary drivers of profit growth were substantial increases in revenue and profit in the Disk Drive Suspension (DDS) Business and a doubling of non-operating income, mainly foreign exchange gains and dividend income.

Factors Affecting Business Performance

【Revenue】Consolidated Revenue increased 8.1% year on year, with four of the five segments recording higher revenue. DDS achieved double-digit growth of +24.0%, Industrial Equipment and Other Businesses +18.4%, and Precision Components +10.0%, while Seats increased only +1.1% and Suspension Springs +3.7%. The revenue composition was Seats 34.5%, Suspension Springs 20.3%, DDS 17.4%, Industrial Equipment and Other Businesses 17.3%, and Precision Components 13.3%. Seats remains the largest segment, but the expanding revenue contribution of DDS is contributing to an improvement in the Company-wide profit margin.

【Profit and Loss】The Operating Margin improved by approximately +1.1pt to 6.6% (5.5% in the previous year), while the Gross Profit Margin also improved to 14.9% (13.6% in the previous year). The SG&A ratio rose slightly to 8.2% (8.1% in the previous year), but this was absorbed by the improvement in the Gross Profit Margin. Ordinary Income was substantially boosted by non-operating income of ¥68.6B (¥29.1B in the previous year), primarily consisting of foreign exchange gains of ¥30.0B and dividend income of ¥24.9B. The only extraordinary loss was a loss on disposal of fixed assets of ¥1.6B, with a limited impact on Net Income. In conclusion, the Company achieved higher revenue and profit, although non-operating income with a relatively high degree of non-recurring characteristics made a significant contribution from the Ordinary Income level downward.

Segment Analysis

DDS was the standout contributor to profit, generating Operating Income of ¥90.6B, approximately 63% of Company-wide Operating Income of ¥143.6B, and an Operating Margin of 24.1%, the highest among all segments. Industrial Equipment and Other Businesses recorded revenue of ¥374.3B (+18.4%) and Operating Income of ¥27.1B (+66.7%), representing a high rate of profit growth, while its margin improved to 7.2%. Precision Components steadily expanded, with revenue of ¥287.9B (+10.0%), Operating Income of ¥13.0B (+26.2%), and a margin of 4.5%. In contrast, Suspension Springs fell into an Operating Loss of ¥5.1B, compared with Operating Income of ¥2.7B in the previous year, despite revenue of ¥438.6B (+3.7%), widening the profitability gap among segments. Seats remained largely flat, with revenue of ¥745.0B (+1.1%), Operating Income of ¥17.9B (+0.4%), and a margin of 2.4%.

Key Financial Indicators

【Profitability】The Operating Margin improved to 6.6% (5.5% in the previous year), while the Net Profit Margin, based on Net Income attributable to owners of the parent, improved to 7.3% (4.5% in the previous year). The Gross Profit Margin also expanded to 14.9% (13.6% in the previous year). The main drivers were the increased revenue contribution from the high-margin DDS Business and higher non-operating income.【Cash Flow Quality】Comprehensive Income was ¥231.5B, exceeding consolidated Net Income of ¥161.5B. The difference was mainly attributable to an increase of +¥52.8B in valuation differences on securities and +¥17.2B in foreign currency translation adjustments, indicating improvement not only in profit reported on the income statement but also in asset valuations.【Investment Efficiency】ROE was 3.4%. Although the improvement in the Net Profit Margin contributed positively, the Total Asset Turnover Ratio remained low, leaving room for improvement in capital efficiency.【Financial Soundness】The Equity Ratio was 62.0%, while the Current Ratio was 205.6% (Current Assets of ¥4,214.5B / Current Liabilities of ¥2,049.7B) and the Quick Ratio, calculated based on current assets excluding inventories, was 190.9%. These ratios remained at high levels, indicating a stable financial foundation.

Cash Flow Analysis

As data from the Statement of Cash Flows has not been disclosed, cash flow trends are assessed based on changes in the balance sheet. Cash and deposits increased to ¥1,258.9B (¥1,084.0B at the end of the previous fiscal year, +¥174.9B, +16.1%), while trade receivables declined to ¥1,520.1B (¥1,585.1B at the end of the previous fiscal year, -¥65.0B, -4.1%). Inventories were also largely flat at ¥302.5B (¥303.7B at the end of the previous fiscal year, -¥1.2B), indicating a limited funding burden from working capital. Investment securities increased to ¥795.6B (+¥84.5B, +11.9%), suggesting an expansion in valuation gains on owned assets. On the liabilities side, long-term borrowings were reduced to ¥176.7B (¥224.0B at the end of the previous fiscal year, -¥47.3B, -21.1%), indicating progress in the repayment of interest-bearing debt. Overall, the Company simultaneously increased its liquidity reserves and reduced interest-bearing debt, maintaining financial stability.

Quality of Earnings

Non-operating income of ¥68.6B, primarily consisting of foreign exchange gains of ¥30.0B and dividend income of ¥24.9B, increased Ordinary Income to ¥206.4B, compared with Operating Income of ¥143.6B. Accordingly, the contribution of non-operating factors with a relatively high degree of non-recurring characteristics to Ordinary Income was significant. Extraordinary income and losses consisted solely of a ¥1.6B loss on disposal of fixed assets, with a limited impact on Net Income—approximately 1% of Net Income—resulting in only a small divergence between Ordinary Income and Net Income. Meanwhile, Comprehensive Income of ¥231.5B exceeded consolidated Net Income of ¥161.5B. The difference resulted from fluctuations in the valuation of other securities and foreign currency, including valuation differences on securities and foreign currency translation adjustments, indicating that net assets increased by more than the profit reported on the income statement. Foreign exchange gains were equivalent to approximately 20.9% of Operating Income. Their potential fluctuation in response to market conditions is therefore an important consideration when assessing earnings sustainability.

Earnings Forecast and Guidance

Progress against the full-year plan—Revenue of ¥8,600.0B, Operating Income of ¥590.0B, and Ordinary Income of ¥640.0B—was 25.1% for Revenue, 24.3% for Operating Income, and 32.3% for Ordinary Income in Q1. Progress for Net Income attributable to owners of the parent was 34.9%, based on the full-year forecast of ¥450.0B. Revenue and Operating Income were tracking in line with a standard quarterly progression, while Ordinary Income and Net Income were slightly ahead of the full-year plan due to the contribution of non-operating income, including foreign exchange gains and dividend income. No revisions were made to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥69, implying a Payout Ratio of approximately 31.1% based on the full-year EPS forecast of ¥222.12. The dividend paid in the same period of the previous year was ¥33, but this represented the interim dividend and therefore cannot be directly compared with the full-year actual dividend. Given cash on hand of ¥1,258.9B and an Equity Ratio of 62.0%, the Company has sufficient financial capacity to pay the forecast dividend.

Risk Factors

1. Profitability gap among segments: Suspension Springs fell into the red, recording an Operating Loss of ¥5.1B against revenue of ¥438.6B (+3.7%), while DDS maintained a high Operating Margin of 24.1%. This indicates that Company-wide profit is dependent on DDS.

2. Dependence on non-operating income: Foreign exchange gains of ¥30.0B, a driver of Ordinary Income, were equivalent to approximately 20.9% of Operating Income and represent a highly non-recurring item that may fluctuate with market conditions. Dividend income of ¥24.9B is also affected by the dividend policies of the companies whose shares are held.

3. Low capital efficiency: ROE remained at 3.4%. Considering this together with the conservative financial structure reflected in an Equity Ratio of 62.0%, room remains to improve capital efficiency alongside profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Financial Results

1. While the profit growth rates of DDS and Industrial Equipment and Other Businesses were high at +43.1% and +66.7%, respectively, driving an improvement in the Company-wide profit margin, Suspension Springs fell into an Operating Loss. The widening profitability gap among segments is noteworthy from a portfolio composition perspective.

2. The growth rates of Ordinary Income and Net Income (+71.7% and +75.2%, respectively) significantly exceeded the growth rate of Operating Income (+30.0%). The primary reason for this difference was the expansion of non-operating income, particularly foreign exchange gains and dividend income. This is an important point to verify when assessing earnings quality.

3. Financial soundness remains high, with an Equity Ratio of 62.0% and a Current Ratio of 205.6%. The forecast dividend of ¥69, corresponding to a Payout Ratio of approximately 31.1%, is supported by the Company’s current financial foundation.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥2,342–¥2,481 at a ±1% change in the Cost of Equity, and ¥2,407–¥2,413 at a change of ±0.1 in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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